§ 6507. Reinsurance. (a) A mortgage insurer may, by contract, reinsure
any insurance it transacts and receive credit for such reinsurance as an
asset or as a reduction from liabilities, including its contingency
reserve liability, in its financial statements where such reinsurance is
placed with another mortgage insurer licensed under this article.

(b) Notwithstanding any provision of law to the contrary, mortgage
guaranty insurance may, by contract, be reinsured, provided that any
reinsurance arrangements entered into by a mortgage insurer and an
assuming insurer comply with the provisions of this article. The
unearned premium reserve required by section one thousand three hundred
five of this chapter, the contingency reserve required by paragraph two
of subsection (a) of section six thousand five hundred two of this
article and loss reserve required by paragraph three of subsection (a)
of section six thousand five hundred two of this article shall be
established and maintained by the mortgage insurer or by the assuming
insurer so that the aggregate reserves shall not be less than the
reserves required by such subsection.

(c) Where a mortgage insurer cedes any insurance to an insurer that
insures or reinsures other lines of insurance in addition to mortgage
guaranty insurance, the amount of insurance so ceded shall not exceed
thirty-five percent of the total exposure insured by the mortgage
insurer after deducting insurance ceded to any other mortgage insurer.

(d) Where a mortgage insurer cedes any insurance to a mortgage insurer
not licensed under this article or an insurer that insures or reinsures
other lines of insurance in addition to mortgage guaranty insurance, in
order for the mortgage insurer to receive credit for such reinsurance as
an asset or as a reduction from liabilities, including its contingency
reserve liability, in its financial statements, such assuming insurer
must maintain a surplus to policyholders of at least thirty-five million
dollars and the following must occur;

(1) the insurer must establish and maintain in a segregated trust an
amount equal to the greater of either the contingency reserve required
by paragraph two of subsection (a) of section six thousand five hundred
two of this article, or four percent of the outstanding total liability
under the aggregate insurance policies assumed from the mortgage
insurer;

(2) the insurer must establish and maintain in a segregated trust, or
provide a letter of credit in a form approved by the superintendent, an
amount equal to the unearned premium and loss reserves;

(3) any such aggregated trust shall be funded by assets permitted by
article fourteen of this chapter for the loss reserve required by
paragraph three of subsection (a) of section six thousand five hundred
two of this article and for the unearned premium reserve required by
section one thousand three hundred five of this chapter, and shall be
funded by either the types of assets specified in paragraphs one, two
and three of subsection (b) of section one thousand four hundred two and
paragraphs one, two and twelve of subsection (a) of section one thousand
four hundred four of this chapter or by tax and loss bonds purchased
pursuant to § 832(e) of the Internal Revenue Code for the greater of the
amount of reserves required by paragraph two of subsection (a) of
section six thousand five hundred two of this article or paragraph one
of subsection (b) of section six thousand five hundred two of this
article;

(4) the reinsurance agreement must be submitted to the commissioner or
superintendent of insurance of the mortgage insurer's domicile for
approval; and

(5) the reinsurance agreement must provide that:

(A) it is not valid until approved by the commissioner or
superintendent of insurance of the mortgage insurer's domicile;

(B) any amendments to the reinsurance agreement must be submitted to
the commissioner or superintendent of insurance of the mortgage
insurer's domicile for approval prior to becoming effective;

(C) the ceding mortgage insurer has a right to terminate the ceding of
additional insurance under the reinsurance agreement if so ordered by
the superintendent;

(D) the superintendent has the right to request from the assuming
reinsurer information concerning its financial condition;

(E) the assuming reinsurer shall notify the superintendent of any
material change in its financial condition; and

(F) such agreements and any amendments thereto shall be provided to
the superintendent, who shall have the right to disapprove of any
agreement. Such agreements and any amendments thereto shall be deemed
approved by the superintendent unless disapproved within thirty days
from the date provided to the superintendent. If the superintendent
disapproves of any reinsurance agreement or amendments thereto the
mortgage insurer shall not receive credit for such reinsurance as an
asset or as a reduction from liabilities in its financial statement.

(e) Nothing contained herein shall be deemed to permit an insurer that
insures or reinsures other lines of insurance in addition to mortgage
guaranty insurance to write directly mortgage guaranty insurance.

(f) Any reinsurance agreement that was valid under this chapter at the
time entered into shall not be invalidated by this section.